How do stocks, bonds and cash perform when the Fed starts cutting rates? - IFA Magazine
==========

In the 12-months after the US Federal Reserve (Fed) starts cutting interest rates, the average return from US stocks has been 11% ahead of inflation. Stocks have also outperformed government bonds by 6% and corporate bonds by 5%, on average. Cash has been left even further in their wake. Stocks have beaten cash by 9% in the 12 months after rates start to be cut, on average. Bonds have also been a better place to be than cash. These outcomes are the findings of new, long-term, analysis of investment returns during 22 US interest rate cutting cycles since 1928. Stock returns were better if a recession was avoided but, even if it wasn’t, they were still positive on average. Bond investors tend to do better if a recession occurs. Corporate bonds have outperformed government bonds, on average, in the more economically-rosy scenario. The range of historical returns is wide for stocks and bonds, but both have tended to do well when the Fed has started cutting rates. Unlike most historical episodes, the Fed is not considering cutting rates because it’s worried that the economy is too weak. It is doing so because inflation is going in the right direction, meaning policy does not have to be so restrictive. If it is right, and can engineer a “soft landing”, then 2024 could be a good year for stock market investors and bond investors.

#Stocks #Bonds #Cash #InterestRates #InvestmentReturns #UsFederalReserve

https://ifamagazine.com/how-do-stocks-bonds-and-cash-perform-when-the-fed-starts-cutting-rates/